Oxford Group: Saudi Arabia wasn't affected by global financial crisis

French president suggests creating common economic government in eurozone

Bush calls for int'l economic summit to be attended by Saudi Arabia next month

Warnings on million jobs decrease in Asia

EuroMoney Conference discusses in Cairo global financial crisis developments; how to face consequences

Standard & Poor’s, a leading provider of independent ratings, indices, investment research and data across the Middle East, and the Saudi Credit Bureau (SIMAH), Saudi Arabia’s first comprehensive consumer credit bureau, hosted a credit seminar in Riyadh on 20 October 2008. This complimentary, half-day event, specifically designed for investment professionals and market practitioners in the Kingdom of Saudi Arabia, took place at the Institute of Banking.

Under the patronage of Dr Muhammad Al-Jasser, Vice Governor of the Saudi Arabian Monetary Authority, the event featured an introduction by Nabil Moubarak, SIMAH General Manager, and presentations by senior Standard & Poor’s executives and analysts on a range of topics and challenges relevant to markets, investors and issuers in the Kingdom of Saudi Arabia.

“The Gulf Cooperation Council countries are increasingly diversifying their economies by opening up their capital markets and undertaking significant policy reforms,” said Jan Willem, Standard & Poor’s Regional Manager for the Middle East.

“The Kingdom of Saudi Arabia is a prime example. The macroeconomic framework has been strengthened by the Kingdom’s accession to the World Trade Organization, which is expected to anchor Saudi Arabia's economy on the path of liberalization and openness. This will provide continued support for ongoing structural economic reform, helping to diversify the economy, reduce unemployment, and encourage private sector growth.”

As well as examining credit trends and opportunities for the insurance, banking and corporate sectors in the Kingdom in the context of these reforms, analysts discussed the outlook for Islamic finance and regional asset managers. The seminar also gave participants a better understanding of the role that credit ratings play in global capital markets and outline the broad array of new actions Standard & Poor’s has launched to further strengthen ratings processes and better serve capital markets.

Saudi Arabia's economy has been ranked 16th in the world and best in its region in regards to ease of doing business, moving up eight places from its ranking last year.

The "Doing Business 2009" report, which was released by the IFC and the World Bank in mid-September, evaluated 181 economies on overall ease of doing business, covering the period from April 2007 to June 2008. The report's index averages the country's percentile rankings on 10 indicators of business regulation, though it does not reflect such areas as macroeconomic policy, quality of infrastructure, currency volatility, investor perceptions or crime rates.

Saudi Arabia was ranked as the most competitive economy in the Middle East and North Africa region, followed by Bahrain, Qatar and the UAE. Similarly, the country was rated one of the region's leaders in terms of reforming regulations, alongside Egypt and Tunisia. Saudi Arabia's high score coincides with its stated goal to become one of the world's ten most competitive economies by 2010.

"Economies worldwide are increasingly committed to regulatory reforms, and this is evident in the Middle East and North Africa, the region with the second-largest share of economies that made it easier to do business," said Dahlia Khalifa, a co-author of the report. "Many economies, including Egypt and Saudi Arabia, are consistently making improvements and are advancing in the global rankings. Across the region, countries are making it easier to do business by looking to early pacesetters for ideas on how to reform," she wrote in a statement that accompanied the report.

In the category of registering property, Saudi Arabia was ranked first in the world, moving up two places from last year. In particular, speed of registration benefited from a new comprehensive electronic system for registering title deeds; it now takes an average of just two days to register property, compared to 37.4 for the region.

Saudi Arabia's score also improved significantly in the categories of protecting investors and closing a business, moving up 25 places overall in each. In fact, Saudi Arabia was the only reformer in the region in regards to ease of closing a business, the category that evaluates the time and cost required to resolve bankruptcies. Saudi Arabia was able to reduce the time to go through the insolvency process from 2.8 years last year to 1.5 years, as well as increase the stakeholder recovery rate from 29.3 cents on the dollar to 37.5.

In terms of investor protection, Saudi Arabia's higher score can be attributed in part to strengthened protections for minority shareholders, as new provisions prohibit interested parties from voting on the approval of related-party transactions as well as increase sanctions against directors for misconduct. In addition, auctions of debtors' assets are taking place more quickly than before.

In the area of starting a business, Saudi Arabia moved from being ranked 38th overall to 28th. The country continued to simplify formalities for commercial registration, reducing registration fees by 80%. Time to start a business fell by three days from last year to an average of 12, compared to 23.5 days for the region.

The Kingdom's rise on the World Bank's index goes hand-in-hand with the Kingdom's "10 x 10" project, in which Saudi Arabia has pledged to become one of the ten most competitive economies in the world by 2010.

Amr Al Dabbagh, governor of the Saudi Arabian General Investment Authority (SAGIA) and chairman of the National Competitiveness Center (NCC), added, "Today, few obstacles remain for local and foreign investors in Saudi Arabia. We welcome all companies to take part in our growth, to take advantage of the wide range of investment opportunities in the Kingdom."

The Saudi central bank poured between $2-$3 billion in deposits into the banking system to ease liquidity pressures, its first direct injection of U.S. dollars in a decade, bankers said on Tuesday.

The Saudi Arabian Monetary Agency (SAMA), the kingdom's central bank, also provided riyal liquidity and the bankers said it may add more U.S. dollar funds to the system given current conditions. The bankers said SAMA had deposited between $200-$350 million with each bank.

The global financial crisis has created tight credit conditions for banks, forcing governments and central banks around the world to provide liquidity to defrost interbank lending.

The three-month Saudi Interbank Offered Rate stood at 4.65125 percent and is likely to fall after the latest attempt to ease credit conditions.

SAMA made a rare repurchase rate cut on Oct. 12 -- to 5 percent from 5.5 percent -- and also lowered reserve requirements to give increased liquidity to banks. It was the first report move since February 2007 and the first cut in four years.

Saudi, which pegs its currency to the U.S. dollar, normally adjusts the deposit rate at SAMA as it tracks the U.S. Federal Reserve.

Meanwhile, the reserve change was expected to release about SR10 billion ($2.67 billion) to commercial banks from funds held in the central bank as cash reserves.

That move had sent a signal to markets that the kingdom, which has long insisted it had the means to support its economy and banking sector if necessary, was prepared to take required action.

US PRESIDENT George Bush has announced that he will host a summit of world leaders soon after the US presidential election to address the global financial crisis.

Bush made the announcement at Camp David before weekend talks on the crisis with French President Nicolas Sarkozy in his role as president of the European Council and European Commission President José Manuel Barroso.

"Both developed and developing nations will be represented. And together, we will work to strengthen and modernize our nations' financial systems - so we can help ensure that this crisis doesn't happen again," Bush said.

"As we make the regulatory and institutional changes necessary to avoid a repeat of this crisis, it is essential that we preserve the foundations of democratic capitalism - a commitment to free markets, free enterprise and free trade.

"We must resist the dangerous temptation of economic isolationism and continue the policies of open markets that have lifted standards of living and helped millions of people escape poverty around the world."

The decision to hold a global summit on the crisis represents a concession to European leaders, who have been pressing for such a meeting against resistance from Washington. The summit, expected to be held in New York before the end of the year, is likely to include the member states of the Group of Eight - the US, Japan, Germany, Britain, France, Italy, Canada and Russia.

Developing countries such as China, India, Brazil and South Korea may also be invited, along with Saudi Arabia, South Africa, Switzerland and Australia.

Sarkozy said the summit offered an opportunity to build "the capitalism of the future" as well as addressing the current crisis. "This may be a great opportunity if we do not fall back into the hateful practices of the past - practices that have led us exactly where we are right now," he said.

"The president of the United States is right in saying that protectionism and closing one's borders is a catastrophe. He is right to say that it would be wrong, catastrophic, to challenge the foundations of market economics. But we cannot continue along the same lines because the same problems will trigger the same disasters."

Barroso said the EU had already acted decisively to agree a common framework on measures to address liquidity in interbank markets, recapitalization of banks, and guaranteeing bank deposits.

He added, however, that global co-ordination was needed to overhaul the financial system and the EU and the US must play a leading role in such reform.

"The international financial system, its basic principles and regulations and its institutions, need reform. We need a new global financial order," he said.

"Together, the EU and the US, we can make a difference together. We should show the way towards an international response to the financial crisis and contribute to global growth."

Meanwhile, South Korea said yesterday it would guarantee $100 billion (€74.5 billion) in bank debts and supply lenders with $30 billion in dollars to stabilize its financial markets.

The government will provide tax benefits for long-term equity and bond investors, while the Bank of Korea will buy repurchasing agreements and government bonds to boost the liquidity of its currency, the won, the heads of the finance ministry, central bank and financial regulator said in a statement from Seoul.

South Korea is struggling with Asia's worst-performing currency, a shortage of US dollars and a stock market that has lost 38 per cent this year.

It is not possible for the eurozone to continue without a clearly identified economic government. We cannot go on like this,” French President Nicolas Sarkozy told members of the European Parliament.

Faced with growing economic problems, Europe is being pushed to unite. Nations inside the eurozone have a common currency, a common market, and a common central bank, but they do not have a common economic policy. As Sarkozy put it, “It is a funny idea.”

Sarkozy wants to create a common economic government throughout the eurozone. And, according to Le Monde, he wants to be the head of that government.

Sarkozy believes the Georgia crisis and the credit crunch show that Europe needs a strong leader. Under the Lisbon Treaty, the European Union would have had a president ruling for a 30-month term. But the Irish rejection of the Lisbon Treaty has stalled this. Europe will continue its system of each country holding the rotating presidency for six months.

The next two countries in line to hold the presidency are not in the eurozone. The Czech Republic, due to take the presidency in January, has a Eurosceptic leader. In Sarkozy’s view, this system will not provide Europe with the strong man he wants.

As the eurozone is not a legal entity in the same way the EU is, a eurozone presidency could be established without the need to create a new constitution. Le Monde reported that Sarkozy wants to head the 15-nation-strong eurozone until 2010, when Spain, another eurozone country, takes over the rotating EU presidency.

Sarkozy also wants a regular meeting for the euro group heads of state and government, and proposed that European nations set up sovereign wealth funds to protect their assets.

Germany opposes Sarkozy’s plans. Worried that an economic government would use German money to bail out Southern European banks, it is refusing to cooperate. German Economic Minister Michael Glos rejected Sarkozy’s ideas in an interview with Frankfurter Allgemeine Zeitung.

He who pays the piper calls the tune. As Germany would be the net contributor to any economic government, it must be formed on Germany’s terms.

The economic crisis is forcing Europe to come together. In time, the nations of Europe will accept German leadership over their financial system. Germany may have vetoed economic unity for now, but a strong united Europe is coming.

Many in Europe see the need for a strong leader at their head. That leader is coming, but he will not be Sarkozy.

Germany will take the lead here also. As times get more desperate, people will be more willing to follow one German strong leader.

For more information on how Europe will respond to the financial crisis, see our article “Europe in Crisis: World in Danger?” published earlier this month.

The South Korean government agreed Sunday on a package of over 130 billion dollars to stabilize the country's financial sector. The package offers a combination of credit guarantees and the infusion of fresh capital to boost liquidity in the banking and export sector, in line with worldwide coordinated efforts to stabilize finance markets, the Finance Ministry said.

"The Korean government will take similar measures to avoid placing domestic banks at a comparative disadvantage in terms of overseas funding and to ally fears in the financial market," Finance Minister Kang Man Soo said.

Among other aspects, the government is to guarantee up to 100 billion dollars' worth of three-year foreign loans taken on by banks up till the end of June 2009.

The ministry insisted that despite the current credit crisis, South Korea's real economy and its financial sector were in "solid" condition.

Besides the loan guarantees, the country's central bank is to provide additional liquidity of some 30 billion dollars to banks and exporters, the money coming from South Korea's currency reserves which as of the end of September stood at 240 billion dollars.

In addition, the government also announced it would expand the working capital of the Industrial Bank of Korea by a further 1 trillion won (750 million dollars) to shore up lending to small and medium-sized companies.

The stability program is subject to approval by the South Korean parliament.

The capstone of the Euromoney Conference came yesterday afternoon as Prime Minister Ahmed Nazif took the stage to discuss the current state of the Egyptian economy.

Singing in thematic harmony with the many Cabinet ministers that had spoken before him, Nazif largely touted the strength of the economy, seamlessly flipping concerned questions from the moderator and the audience in order to highlight the positives.

Before taking questions, though, Nazif began his session with brief opening remarks. In them, he addressed the two major economic challenges Egypt has faced this year: commodity and energy price increases early in the year and the current global economic meltdown.

“We were integrating with the rest of the world, and you pay your price when you integrate,” he said of the hardships that hit the country early in the year.

One outcome of the troubles from early in the year was the dramatic increase in the inflation rate. But Nazif argued his government’s case in the handling of inflation, urging his audience to read the numbers.

“We expect inflationary figures to start dropping,” he said.

Reprising the sunny outlook for the economy that many discussed, Nazif addressed the current crisis, asserting the strength of the Egyptian banks.

“Our banking system today… is in a much better position than many, many countries in the world,” he said.

Nazif also forecasted that, despite turmoil in the international markets, the growth rate would remain steady at around 7 percent. “If not,” he added quickly, “maybe 6 percent.”

In his unscripted remarks, Nazif made several other predictions.

He anticipated that Egypt would emerge from the economic crisis with “fewer but bigger banks,” noting the continued consolidation of the banking system.

He also predicted that the country would see “more private-public partnerships in infrastructure,” adding that the market would see more of this in the coming weeks.

In one of his first and most probing questions, moderator Simon Brady asked Nazif to discuss his greatest concern with regard to the Egyptian economy.

Not missing a beat, Nazif deflected the question and turned the discussion back on the international community. “We’re more concerned about slowing growth in the rest of the world,” he said.

Though he took little opportunity to look backwards, Nazif did note in response to a question that the deficit as a percentage of GDP has fallen from 11 percent to 7 percent over the four years of his tenure.

Nazif’s speech, however, boiled simply down to a pep talk directed at Egypt’s major economic and financial powerbrokers who had assembled in the room.

Lines like “Our resolve is still there,” and, we’re looking for “not just good answers but good responses” were common throughout his remarks. He became most emphatic, though, when an audience member asked him about whether the current economic slowdown might slow his hopes for a trickledown effect in the economy.

The Prime Minister passionately argued that he had met with many low-income Egyptians, mentioning specifically farmers and construction workers, and dared anyone in the audience to argue that these laborers were not better off today.

There were no farmers or construction workers available at the conference to comment.